Are there too many charities in America?

ByPaul LambSeptember 24, 2009

Vallejo, Calif. — There are more than 1.4 million charities in the United States. That's more than one charity for every 300 people. Do we really need so many?

At a time like this, when so many people are out of work and demand for social services is higher than ever, it is tempting to answer "yes." But equating increased general demand for services with the need for more organizations is like suggesting an increase in the demand for oil requires more cars. What we need is more fuel-efficient cars and more efficient nonprofits.

So how we can innovate the sector as a whole so any nonprofit can do better regardless of the prevailing economic winds?

One radical idea is to adjust the nonprofit model and begin to let communities engage directly with causes and people in need.

Taking a page from the playbook of peer-to-peer services such as eBay, charity "buyers" and "sellers" could engage directly without the need for a middleman.

Instead of giving money to the United Way to support food banks, why not give the money directly to the hungry?

Because tossing money in a cup or handing cash to someone on the street is impractical on many levels, food stamp-like vouchers, for example, could be made available through existing ATM machines. This way the money that might go to pay for the distribution organization could be saved and used to buy more food, and the hungry could claim their vouchers anywhere there is an ATM and a food store.

Obviously, this peer-to-peer model doesn't work for direct-service organizations such as hospitals and workforce training groups. But it could mean significant savings and more efficient programs elsewhere.

Cost savings could also come from outsourcing. Just as many businesses reduce expenses by outsourcing call support, nonprofits could pool and send their back-office work and general call-in inquiries to inexpensive outside agencies. Outsourcing groups can handle accounting and general inquiry calls at a fraction of the cost of hiring an accountant or secretary.

The money saved from outsourcing could be plowed back into programs and allow nonprofit staffs to do what they do best – provide services to their constituencies.

And many social service organizations could avoid the cost of office rental and on-site staff altogether. Shifting to an online-only organization, via a virtual office and video chats, could in certain instances eliminate the need for a real-world office or multiple service sites. Agency staff could work from anywhere, offer 24-7 assistance, and serve a larger client base no longer restricted by physical location.

In cases where office space is needed for meetings and direct care, sharing offices between nonprofits is a much more affordable alternative.

Beyond cost savings, another idea is to put the care back in the hands of local communities themselves. Instead of relying on outside agencies to provide services, neighborhood care councils composed of volunteer citizens and experts could be responsible for determining local need and distributing resources to address those needs.

Neighborhood care councils could manage collaboration among organizations and direct the flow of public and private monies, avoiding the uncoordinated services and inconsistent care in so many communities. This collaboration would inevitably weed out ineffective and redundant services.

Finally there is the increasingly popular option of social enterprise, where nonprofit organizations develop revenue-generating ventures to help support their programs. No longer relying on handouts and wasting valuable service time on fundraising, more charities could launch their own ventures or partner with existing ones to become self sustaining.

During these tough economic times, when many nonprofits are doing all they can to stay afloat, reorganization of community-based groups is somewhat of a luxury. The overhauls suggested above will be no easy task. But in the long run, they will help the communities nonprofits are intending to aid by taking the weight off the administrative side.

In our sincere desire to show compassion and respond to pressing needs, we sometimes forget innovation could allow us to do more of both.

And while the opportunity to replace the old with the new is not a good enough reason in itself to make changes, providing better and more efficient services for those who need help most certainly is.

Paul Lamb is the principal of Man on a Mission Consulting and a former nonprofit executive.